Earlier this year, the Israeli Ministry of Agriculture officially classified the growing of medical cannabis as a ‘farming sector’, paving the way for marijuana growers to receive government aid, grants, training and water quotas, just like any other eligible farmer.

The Ministries of Health and Finance also recommended legalizing the export of medical cannabis; with Israeli farmers potentially exporting $1 billion worth of medical cannabis annually. Currently, companies are only allowed to export medical technology for cannabis, but not the plant itself.

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Israel is considered a pioneer in marijuana research mainly thanks to Prof. Raphael Mechoulam of the Hebrew University, who is known as the father of medical cannabis. Beginning his research in Israel in the 1960s, he was the first scientist in the world to identify various compounds of cannabis, including THC, the chemical known for causing a “high.”

Since then, Israeli researchers have continued to push the boundaries, from using cannabis to kill cancer cells, to applying micro-dosing techniques to heal brain damage. The government is encouraging this research; Israel is one of the few countries where medical cannabis is allowed to be tested in clinical trials on humans.

It also invests resources in the industry. Earlier this year, the Israeli government announced that it would invest $2.13 million in 13 research projects on cannabis, making Israel one of three countries with a government-sponsored cannabis program. In 2016, foreign investors poured $100 million into Israeli cannabis startups, according to Saul Kaye, founder and CEO of cannabis tech startup accelerator iCAN.

The epicenter of marijuana research

Both within and outside of Israel, there is optimism about the country’s potential in the cannabis sector. “There is significant demand for Israeli cannabis,” Clifton Flack, CEO and co-founder of Israeli cannabinoid company CIITECH, said at the recent Cann10 conference held in Israel. “We’ve been talking about this country as the epicenter of research for a number of years.”

The country’s expertise in high-tech is also a contributing factor. “Israel has very good experience at enabling new ecosystems,” attorney Yoav Etzyon, a partner at law firm APM & Co., said at Cann10.

Israel has a proven track-record in the areas of AgTech and food food tech. Courtesy of Israel Tourism

Given Israel’s success in the areas of AgTech, food tech and medical devices – which are all adjacent areas to the nascent cannabis industry – it is no surprise that eyes are turning towards the Startup Nation as the field of medical cannabis continues to grow.

The legal export and use of medical and recreational cannabis is becoming more common around the world. Some 30 US states have legalized cannabis for medical use, and eight others allow recreational use of the drug. Countries such as Canada and Australia are already exporting the cannabis plant for medical use.

There is an advantage to being one of the first movers in this industry. As research continues to progress, it is likely that we will see the gradual dismantling of regulations against medical cannabis around the globe. This will create more demand in an industry that is already suffering from supply shortages.

“It is a race,” said Mark Chess, managing director at Infinity Venture Partners, at the Cann10 Conference. “Israel has a lead, but we need the continued support and execution of the entire ecosystem to maintain our edge.”

Legalizing the export of medical cannabis may be a necessity if Israel wants its domestic industry to continue to grow. The Israeli market for medical cannabis is small, making it difficult for companies to scale up, and discouraging startups that are aiming for international growth. Removing this ceiling will entice more companies to enter the market, fueling further research and international investment.

According to government officials, over 500 Israeli companies have already submitted applications for licenses to grow, manufacture, and export cannabis products.

The new entities entering the market will join a range of Israeli companies that are already flourishing. Dr. Tamir Gedo, CEO of Israeli medical cannabis startup BOL Pharma, estimates that in 2016, there were approximately 70 Israeli companies working in the field of cannabis.

For example, startup Syqe Medical has developed a 3D-printed, hand-held cannabis inhaler that vaporizes tiny granules of medical cannabis in small doses. In 2016, cigarette manufacturer Phillip Morris invested $20 million in the startup.

The cannabis inhaler developed by Israel’s Syqe Medical. Courtesy of Sype Medical

Pharmaceutical company Therapix Biosciences has developed cannabinoid-based drugs, creating a unique formulation of a tablet for sublingual administration. The tablet is currently undergoing trials, and has the potential to treat impairments in cognitive functioning, such as Alzheimer’s and Tourette’s syndrome.

In addition, Tikun Olam, the largest supplier of medical cannabis in Israel, is already cooperating with companies in Canada, the US, Australia, and Spain. It has one of the largest cannabis treatment databases in the world, and also developed a variety of marijuana strains.

If Israel allows its farmers to export medical cannabis, the economic benefit could be immense. Says Israeli parliament member Tamar Zandberg: “This is an export Israel can be very proud of, because we stand at the forefront of technological, medical and cultural developments.”